Banking News

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Brits raid savings accounts to cope with living costs

14 August 2008 / by Rachel Mason

Brits are being forced to raid money from their savings accounts to combat the spiralling cost of living, according to recent research.

A Birmingham Midshires study has shown that savers have taken £434 from their savings accounts in the last three months, which is a seven per cent increase on last year.

And it is older people's savings accounts that are taking the biggest hit, with the over-55s taking £806 on average, an increase of 18 per cent on 2007; figures suggest they could be supporting younger family members.

According to Birmingham Midshires, the main reason for siphoning savings is unexpected bills – a third of people admit to raiding their rainy day money to pay for bills, nearly a quarter used savings for a holiday, and nearly a fifth said they needed the cash to pay for 'unforeseen emergencies'.

And it is people in the south of the country that have raided the most, draining their savings by £730 on average – a rise of 36 per cent on last year. In total, 40 per cent of people have raided their savings, with one in five taking between £1,000 and £5,000.

But that means that nearly 60 per cent haven't had to touch their savings in the past three months, although that is down marginally from 63 per cent last year.

"We appreciate that in today’s financial climate, it is proving extremely difficult to put money aside as people are having to spend more on their day-to-day living costs," said Tim Hague, director of savings and investments at Birmingham Midshires.

But, even though Brits are being forced to tighten their purse strings, they are still managing to keep putting money aside, managing to save an average of £516 in the last quarter with one in ten putting away between £1,000 and £5,000.

"The fact that people are still managing to put significant amounts of money into savings is an encouraging sign for the times ahead," said Mr Hague.